Another Blow to Coal: Colorado Pushes Utilities To Natural Gas

By Kirsten Korosec

Updated on: April 20, 2010 / 2:58 PM
/ MoneyWatch

Wow, the outlook for the U.S. coal industry is getting dimmer by the day. If greater government scrutiny on coal mining safety wasn't enough, now an effort to force utilities to switch their coal-fired power plants to natural gas is gaining momentum.

Colorado Gov. Bill Ritter yesterday signed a new clean-air bill that will require Xcel Energy to cut nitrous oxide emissions by up to 80 percent from several aging coal-fired plants by the end of 2017. And the utility has to give natural gas first consideration when it looks at how to reduce emissions from those plants.

The bill is a win for Xcel because the utility will be allowed to enter into long-term contracts to lock in lower natural gas prices and protect it from volatility in the market. Of course, that means if natural gas prices suddenly drop, customers will still be paying that "locked in" amount. Environmentalists are happy since coal-fired power plants produce more greenhouse gas emissions than ones that use natural gas. And of course, the natural gas industry is pleased.

Which leaves coal the odd man out. Not to mention a little poorer. The coal industry spent an estimated $2 million lobbying against the bill. And then there's the loss of coal mining, railroad and utility jobs expected from the bill's passage. Less demand for coal, less demand for coal miners or the rails that transport the fuel source. And natural gas power plants are more efficient and are less labor intensive than coal plants.

Colorado lawmakers took action now because they expect stricter emissions rules from the EPA and maybe even Congress, if it gets around to passing a climate-change bill. And their timing, while some may think it's a bit early, was spot on. Many of these coal-fired plants are old. Very old. And they need to be replaced. Xcel would have replaced the plants in the next decade anyway. This bill simply encourages the company to favor options that have lower emissions.

The bad news for coal is that Colorado is just the beginning. California, Washington and Massachusetts have passed state laws to reduce emissions, which effectively bans traditional coal-fired power plants from being built. And in some states, like Nevada, utilities are making the switch to natural gas on their own.

Of course, there are consequences. As BNET Energy just mentioned Monday, costs will rise for customers as power plants get cleaner. But that holds true for utilities trying to make their coal plants cleaner as well, not just those that switch to natural gas.

The coal industry warned that prices will rise as a result of Xcel Energy switching to natural gas. And that's not wrong. But ironically, carbon capture and storage technology -- the coal industry's only hope for survival in an emissions-regulated world -- will raise costs for customers who get their electricity from coal-fired power plants. And even if utilities don't find cleaner options, customers will still pay higher rates because federal regulations will make pollution more costly than ever before.